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Swift's Market Comments

Holiday doldrums may be slowing cattle markets

Holiday doldrums may be slowing cattle markets
I am not ready to hedge anything live cattle yet, and feeder cattle opportunities to lay off risk are still wanting.


Interest in the price of cattle continues to grow, and open interest this morning increased by another 4,100 contracts.

The June contract is benefiting from this as much if not more than April is. Honestly, I was not intending on doing anything this morning until I saw the increase in open interest.

With two back-to-back days of significant increases, I can't imagine the funds wanting to stretch much further until something different materializes. So, the few long positions held in the February contract are being recommended liquidated today and flat the position of significance.

Live cattle have cleared the hurdle of past highs, but now are struggling their way north. Potential hedging targets loom overhead.

I am not ready to hedge anything yet and only perceive the next few trading days to be mundane due to the holiday season. With the most recent premium put back on futures, it doesn't leave much wiggle room until cash trades decisively one way or the other. 

Option writers are as stubborn today as they were yesterday. In the feeder cattle, I've had little luck in executing positions in line with theoretical price. The illiquidity of these options is a huge hurdle to attempt to overcome when hedging. I recommend that while the market is firm, you lay off the one-third of inventory, if not already, and hold tight for the $130.00 area.

Again, I perceive that regardless of what the cash trade is this week, the funds will most likely cool their jets some as more cash news becomes available.

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. Past performance is not necessarily indicative of future results.

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